Gentex Corporation Business Report FY ended Dec. 2016

Financial Overview

(in million USD)

FY ended Dec. 31, 2016

FY ended Dec. 31, 2015

Rate of change(%)

Factors

Sales

1,678.9

1,543.6

8.8

1)

Operating Income

511.7

458.8

11.5

-

Factors1) Net Sales-The Company’s net sales for the fiscal year ended December 31, 2016 increased by 8.8% over the previous year to USD 1,678.9 million. The primary factor for the Company’s increased sales was a 9% increase in automatic-dimming mirror shipments, from 33.0 million to 36.1 million, highlighting increased overall market penetration of automatic-dimming mirrors.

Business Partnership

-The Company and TransCore are working together to provide automotive manufacturers with a vehicle-integrated tolling solution that enables motorists to drive on all U.S. toll roads without a traditional toll tag. The two companies have signed an exclusive agreement to integrate TransCore's Universal Toll Module (UTM) technology into the Company's electronic rearview mirrors. As the Universal Toll Module enables travel across all U.S. toll roads, motorists would no longer need to have multiple toll tags for different regions or manage multiple toll accounts. (From a press release on January 4, 2016)

Awards

-The Company received a 2016 Automotive News PACE Award for its Full Display Mirror (FDM). The FDM is a rear vision system that consists of a dynamic imager that captures rear-facing video and streams to a LCD display integrated into a mirror, thus optimizing rear visibility. The FDM can also operate as a standard automatic-dimming rearview mirror. (From a press release on April 13, 2016)

-The Company received a Special Recognition Award from Toyota Motor Corporation for its mirror systems. (From a press release on March 16, 2016)

-The Company announced that it has received a GM Innovation award for its Full Display Mirror (FDM), an intelligent rear vision system. The Company was also named a 2015 GM Supplier of the Year, an honor it has now received 17 times. (From a press release on March 11, 2016)

Outlook

-The Company expects that its sales in the 2017 calendar year will be between USD 1.78 and 1.85 billion.

R&D Expenditure

(in million USD)

FY ended Dec. 31, 2016

FY ended Dec. 31, 2015

FY ended Dec. 31, 2014

Total

94.2

88.4

84.2

% of sales

5.6

5.7

6.1

-The Company’s investment in research and development for the fiscal year ended December 31, 2016 increased by 6.6% over the previous year primarily because of an increase in staffing levels to support growth and new business development.

Product Development

-At CES 2017, the Company displayed a new three-camera rear vision system to a rearview mirror with integrated display. The three cameras stream video of the area behind the car and provides multiple composite views for the mirror and integrated display.

-In 2016, the Company announced a biometric solution embedded within an interior mirror that uses iris scanning technology to secure the vehicle environment. The biometric authentication system can be used for various applications including vehicle security, vehicle start functionality, and personalization features such as mirror positioning, music choice, and seat location. The Company worked with Delta ID, which provided its ActiveIRIS technology featuring unique iris-recognition software, to develop this solution. The two companies recently completed a strategic partnership agreement for automotive applications.

Patents

-As of 2016, the Company owns 566 U.S. patents and 642 foreign patents. Of these totals, 521 U.S. patents and 623 foreign patents are related to electrochromic technology, automotive rearview mirrors, microphones, displays, cameras, sensor technology, or HomeLink products.

-The Company has 276 U.S. patent and 252 foreign patent applications currently pending.

Capital Expenditure

(in million USD)

FY ended Dec. 31, 2016

FY ended Dec. 31, 2015

FY ended Dec. 31, 2014

Overall

121.0

97.9

72.5

-Automotive Products

99.8

97.6

71.0

-The increase in capital expenditures for the fiscal year ended December 31, 2015 was primarily due to an increase in production equipment purchases and building related costs.

-The Company expects to invest between USD 115 and 130 million in capital expenditures during the fiscal year ending December 31, 2017.

Investment in U.S.

-In 2014, the Company began construction at the 250,000-square-foot North Riley production and distribution facility in Zeeland, Michigan. The Company invested between USD 60 and 65 million in the development of the facility. In 2016, the facility’s distribution operations began operations. In early 2017, the North Riley campus will begin manufacturing operations. The facility is expected to have an annual production capacity between five million and seven million mirrors.

Investment outside U.S.

-The Company completed a 50,000-square-foot expansion of its office and distribution facility in Erlenbach, Germany, investing approximately USD 6 million into the project.